It provides a clear picture of your revenue stream and helps improve business efficiency. Net sales is what remains after all returns, allowances and sales discounts have been subtracted from gross sales. Remember, regularly updating your records will help you maintain an accurate financial overview and make informed business decisions. Make sure you consistently track and record all relevant transactions, …

In this comprehensive guide, we’ll walk you through the step-by-step process of calculating net sales, from understanding the components to analyzing insights for growth. To report Net Sales, subtract any returns or discounts from the total sales revenue. This will give you the amount of revenue actually earned by the company. KPI development: A step-by-step guide to setting and tracking …

Multi-step income statements are one of the two income statement formats businesses can use to report their profits. A multi-step income statement reports a company’s revenues, expenses and overall profit or loss for a specific reporting period. It is a more detailed alternative to the single-step income statement and uses multiple equations to calculate a business’s net income. It lists …

Preparing the multi-step income statement is beneficial for medium to big corporations to keep track of their income. As the revenue and expenses are segregated into operating and non-operating accounts, it provides greater insight into the company’s financial performance. The components of the multi-step income statement comprise three equations that calculate a profit metric that each measures a unique attribute …

But if you have a large number of expenses that income has to cover, you’re not as profitable as you seem. Under the principle of regularity, accountants cash basis accounting vs accrual accounting are required to adhere strictly to established accounting rules and standards with no room for deviation. Following the principle of regularity also ensures that every aspect of …

For example, let’s say you provide services to a client in December but don’t receive payment until January. Under accrual basis accounting, you would recognize the revenue in December even though you haven’t received the cash yet. This could lead to a mismatch between your reported revenue and actual cash inflows for that period. Accrual accounting requires careful tracking of …

So he can process and submit your corporate taxes without a moment’s delay. Finally, check out these articles that contain steps to generate and customize your financial reports to see different aspects of your business. If you’re a QuickBooks user and have stumbled across an item called “Opening Balance Equity” in your balance sheet’s equity section, this blog post is …

A company with a high proportion of current assets relative to current liabilities is generally in a more stable short-term financial position. The working capital ratio (current assets minus current liabilities) helps gauge operational efficiency and liquidity risk. A negative working capital balance may indicate cash flow issues, while excessive current assets could suggest inefficient resource allocation. Next, the money …

Assets are listed in the balance sheet in order of their liquidity, where cash is listed at the top as it’s already liquid. The next on the list are marketable securities like stocks and bonds, which can be sold in the market in a few days; generally, the next day can be liquidated. Liquidity, or accounting liquidity, is a term …

The IRS has specific rules regarding the amortization of intangible assets. The useful life of an intangible asset cannot exceed 15 years, and the asset must have a determinable useful life. Goodwill, for example, cannot be amortized because it has an indefinite useful life. Amortization calculation refers to the process of determining the amount of each loan payment that goes …